Wednesday, August 29, 2007

Vietnam has the largest salary gap in Asia

local salary gap near top in Asia

The pay gap between clerical staff and senior management in Thailand is the second largest in Asia, according to the management consultancy Hay Group.

Senior managers have gross salaries 10.6 times those of lower-ranking clerical staff, a level second only to Vietnam. More developed economies in the region such as Australia, South Korea and New Zealand have pay gaps of just 3.1 times, following the trends of mature economies such as the UK and US.

Boonlerd Viboonkiat, country manager for Hay Group's reward information services, said the pay gap in Thailand was influenced by the need for companies to recruit higher paid expatriates to compensate for local skill shortages.

''Thailand's high ranking is in part due to the fact that starting salaries for clerical jobs in Thailand are relatively low,'' he said.

''At the other end, bigger salaries are being used to bring in senior managers, often from overseas, due to a skill shortage here,'' he said.

Roland Ruiz, Hay managing director in Singapore for reward information in Asia, agreed that the lack of skills in the labour force for emerging Asian markets was producing the wide pay gap.

''Our analysis shows that the powerful growth of emerging Asian markets is outstripping the global supply of senior managers,'' he said.

''In Vietnam and China, there is a real lack of management talent. Pay is indicative of the premiums being paid to managers to attract and retain them. This trend is likely to continue as the Asian economy continues to enjoy positive growth.''

From 2005 to 2007, the gap did not narrow for countries such as India, China and Vietnam, due to strong economic growth.

The pay gap in the Philippines remained relatively constant due to strong unions, while Pacific countries such as Australia and New Zealand and developed Asian economies including Hong Kong, Singapore and South Korea also saw relatively little change.

But the Hay Group cautioned that the pay gap in Asia should widen over the next five years ''as the global war for top level management talent intensifies''.

Mr Ruiz said the widening gaps would have social and business implications for companies and policymakers.

''Governments may choose to impose minimum wage schemes or reform their tax structures in the short term, or invest in more education and training in the longer-term so as to spread the economic gains. All these will have implications on companies doing business in these countries,'' he said.

''The widening pay gap is also indicative of the wide divide in skills and capabilities between senior executives and clerical employees. Economic globalisation will continue to put competitive pressures on companies and governments to come up with the right mix of talent and compensation policy across the entire workforce spectrum.''

Mr Ruiz said governments face a challenge in balancing between ''having a globally cost-competitive work force and socio-economic equity''.

Companies meanwhile need to make strategic choices about their locations and parts of their business to best spend compensation dollars.